We previously wrote about our journey renting out our car, an Audi TTS, to complete strangers through the Turo app. Spoiler alert: we lost a lot of money renting out the car because of maintenance issues and bad renters. After publishing the article, we received lots of questions on how you can rent out your car.
Some thought the maintenance of the car was the only thing stopping us from making a dollar. Others assured us that if we had kept going with the same car, we would’ve eventually turned a profit. With $2k paid in taxes and $4k in maintenance bills, gaining back lost ground likely would’ve taken thousands of rentals.
Rent Out Your Car the Right Way
Instead of dwelling on this failure, we wanted to see if it is possible to actually rent out your car at a profit on Turo.
From our prior article, it’s clear we need to optimize for three different things:
- frequency of the car being rented
- low depreciation – the biggest cost of keeping a car
Searching through the Turo site, the data shows luxury convertibles as the best option for frequent renting in the San Francisco bay area. Other types of cars which have frequent rentals are hybrids and similarly boring rides. Being an enthusiast website, we’ll explore the luxury convertible option.
The Science of a Successful Rental
Now that we’ve settled on another luxury convertible, it’s now time to check out depreciation curves. We use CarGuru’s used car trends which gives us historical car values listed on their site. We’re also looking for used cars to minimize depreciation. We’re not going to bother with new cars since they depreciate 20 – 30% in the first year. That’s a lot of renters to cover that kind of cash.
We gathered the one year depreciations for a few convertibles:
|Convertible Type||Projected Depreciation||Yearly Cost|
|2012 Audi A5||18.0%||$3.9k|
|2011 BMW 1 Series||14.1%||$2.3k|
|2014 BMW 2 Series||13.8%||$4.0k|
|2011 BMW 3 Series||18.9%||$3.8k|
|2012 Infiniti G37||16.1%||$3.1k|
|2014 Jaguar F-Type||18.2%||$13.0k|
|2012 Porsche Boxster||7.8%||$2.6k|
From this data, there are a few contenders: the BMW 1, the Infiniti G37 and the Porsche Boxster.
As we have personally experienced, reliability is also crucial. A reliable car will cost less in maintenance and spend less time away from being rented.
That’s right – you’re now running a business and have to worry about opportunity costs from missing potential rental days.
Reliability is Paramount
The 2011 BMW 1 series came in two models: the 128i and the 135i. The 128i has few common problems, but the 2011 BMW 135i experiences issues with the high pressure fuel pump (est. $700) and turbo replacement (est $1,000).
We found the Infiniti to be relatively solid with the 2012+ models yielding no large issues.
Finally, 2012 was the Porsche Boxster’s final model year for the face-lifted 987 model which had excellent reliability throughout its life in both the S and non-S Variants. The S has more standard features and a more powerful engine. We’ll use the S version for this comparison.
Costs of Renting Out Your Car
Now that we have cars that will likely rent frequently, projected depreciation and reliability, we can map out potential costs. Let’s assume you have $10k to put down on any of these cars and are purchasing a model with less than 50k miles on a 60 month loan. You’re also doing a PPI and only buying a car with recently changed brake pads and tires because you don’t want to deal with those two items when you rent out your car. PPI not included in costs below.
|2011 BMW 128i||2012 Infiniti G37||2012 Porsche Boxster S|
|Interest on Balance (@ 2.5%)||$140||$319||$639|
|Expected Maintenance in Year 1||$250||$250||$350|
|Year 1 Cost of Ownership||$4,103||$5,569||$6,914|
|Monthly Cost of Ownership||$342||$481||$576|
The Year 1 cost of ownership has now been calculated, and we divided that cost across 12 months to get an idea of monthly cost.
Note: the monthly cost of ownership may be different from the loan payment on purpose. This monthly cost is used to calculate what our true break-even point will be. Anything above this will be profit to you – though keep in mind if you rent out your car many times a month, depreciation will be higher than projected above.
Now it’s time to figure out how much we can rent each of these cars out. Seasonality played a huge part in rental prices for our TTS. It’s also currently winter which means rental prices are likely depressed right now. For the sake of a conservative estimation, let’s assume rental prices will be 20% higher in months May – October.
Scanning comparable cars with over 10 rentals in the bay area, we came up with the following estimated average rental price:
|2011 BMW 128i||2012 Infiniti G37||2012 Porsche Boxster S|
|Rental Days to Break Even||5.3||4.9||4.4|
Picking the Perfect Vehicle
Though the cost to purchase the BMW was the lowest, it looks like it’ll take the most amount of days to break-even each month. We also have concerns on the size of the BMW 1. It doesn’t have much truck space and the backseat is practically a torture device. Further, the BMW has the lowest expected reliability of the three which may cause you to miss necessary rental days and potentially add significant costs to the ownership.
Demand on the Infiniti G37 convertible is hard to predict. There is only one in the bay area listed with a few rentals. This may mean that no one has tapped the G37 to be a rental, which may add value. Or it means no one really wants to rent a G37. It could be a bit of a gamble.
From the data above and our personal preferences, we’d elect to go with a 2010 – 2012 Porsche Boxster S with a few renter-centric options like an upgraded sound system. Though the loan may be bigger, we think it’s the safer bet. Demand is there, future depreciation is more modest, and reliability – provided you get a PPI and a solidly maintained example – is strong.
Remember: Your Time is Valuable
Because your time has value, it’s important to consider a few other items when renting out your car: 1) time spent meeting with random strangers and 2) the endless carwashes you’ll have to drive to.
On the first point, we grossly underestimated the time spent meeting with people and walking them through the car. If you pick a car with lots of features, or just want to ensure they know how to put the top up and down properly, you’ll likely have to spend 10 – 15 minutes with the renter when they first pick up the car. It is also good customer service. This can be avoided through dedicated lockboxes, but we never liked the feeling of having a stranger pick up keys to your car without matching the car to a face.
If you don’t go with an automated solution, like the lockbox approach, it means you’re going to have to decline rentals when you cannot arrange a convenient time for both of you to meet.
On point 2, you’re going to go through lots of car washes. You may choose to do it in your driveway or take it to the local wash but both options have a time and materials cost to them which are not included in the above. Keeping the car clean is essential to a good rental experience, so stock up on exterior and interior cleaners or get that car cleaning punch card.
The temptation to try this again is present as we write. But then we remember the early mornings of getting up to meet renters, driving constantly to the local car wash, and the stress during the winter of having to lower rental prices (and sometimes still not getting demand). If we had to do it again, we’d elect to purchase a Porsche Boxster S and set up an automated pick-up/drop-off solution. If you go down the rental car route, good luck and let us know how it goes!
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Disclaimer: Please note this was a mental exercise and not intended to be anything more than ‘fun’ reading. This is not financial advice.